By Robert Wenzel
Former Federal Reserve chairmen Ben Bernanke was in San Francisco last night.
In conjunction with the promotion of his book, The Courage to Act: A Memoir of a Crisis and Its Aftermath, he appeared at the Commonwealth Club of California in a Q&A format where he was questioned by Michael Moritz, Managing Partner, Sequoia Capital.
I was stunned by the way the Q&A began. Stunned.
If there is a clue as to what government officials are concerned about by what they go out of their way to lie about, then it is clear that they are very concerned that American citizens may not believe the US government has the gold it claims to have in its vaults. That is, gold that is listed on the financial books of the US Treasury and via Treasury certificates on the books of the Federal Reserve.
The first question Moritz asked was a total softball, "So what did you do as Fed chairman, go around to all the banks in the country and see if they had cash in their vaults?"
The crowd of approximately 1,200 at Nourse Theatre laughed. But it is noteworthy how Bernanke answered the question and where he took it.
He replied, "No, but I did visit the vaults at the New York Fed where the gold is stored." And then he looked at the crowd and said, "I checked, it's all there, so you can relax."
The problem with this answer is that US Treasury gold is not held at the New York Fed, it is supposedly held at Fort Knox, in Fort Knox, Kentucky, just south of Louisville (with smaller amounts at West Point and Denver and an even smaller amount at the NY Fed)
Moritz's follow up question provided Bernanke the opportunity to correct his statement if it was just a slip. Moritz asked, "Isn't gold for foreigners also held at the NY Fed?"
Bernanke did not at that point attempt to clarify his earlier statement, which implied that US gold was held at the New York Fed. Instead, he went on to make another misstatement.
He said that there were many scare stories that there was no gold being held at the New York Fed and that in fact Germany had decided to withdrew all its gold. "They just came and carried it back," he said.
But although, Germany has withdrawn some gold, it has far from withdrawn all its gold. Of some 300 tons of gold originally held at the New York Fed by the German central bank, approx. 200 tons has yet to be withdrawn. Indeed, they have launched a new program to audit the gold they are still holding at the New York Fed.
Bernanke then went on to mislead on the Fed money creation role. He said that it was an error to think that the Fed prints money. He said that it was the Bureau of Engraving which does the printing . While this is correct in a technical physical printing sense, it misdirects from the more important fact that it is Fed monetary policy which plays a major role in determining how much money is actually printed--and when you go beyond physical money and include money in checking accounts (and more) as do all economists, then it most certainly is well beyond what is going on at the Bureau of Engraving.
Bernanke concluded his amazing performance by absolving himself of any role in the recent financial crisis.
He said that the financial crisis was not the result of failed monetary policy but occurred because of regulatory problems.
Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics